Topic: The Two Sides of Risk

You are required to provide a thread in response to the provided prompt for each forum. Each thread must be 500–750 words and demonstrate course-related knowledge. Each thread must reference at least 3 peer-reviewed sources and must include at least 1 biblical integration and 1 citation of a text. In addition to the thread, you are required to post a reply to at least 2 classmates. 
Each reply must be 200–250 words and reference at least 1 peer-reviewed source or include at least 1 instance of biblical integration in addition to a text. The instructor is looking for substantial, thoughtful, and critical interaction.

Thread: Read Case 1.8 on p. 36 of the Wilson text and address the following prompts:   
1.8 Case Study 
RPO Construction has been hired to build a custom-made executive home in Vancouver, Washington. Two acres of property have been purchased on the banks of the Vancouver Harbor by a retired executive and his wife for the location of their new custom home. The single-family residence will be an8,500 square feet, two-story structure consisting of wood frame, cement slab foundation, and tile roof. There will be a three-car garage attached, fully landscaped front yard with circle-around driveway, patio, and deck off the rear of the house overlooking the harbor. The deck will include an infinity pool and oversized spa with outdoor kitchen appliances. A dock with a boathouse will be constructed at the water’s edge with the patio decking connected by a wood staircase. Concerns in the house construction consist of pouring the slab foundation during the winter season, difficulty in location of the septic sewer system and obtaining permits that allow for the creation of a dock and boat house. The owners of the house have sold their current home and will be closing escrow shortly, requiring them to stay in a hotel temporarily. They have given the construction company the completion date so they can minimize the cost of their hotel stay. The construction company has told the homeowners it will take six months to finish their home if there are no delays due to poor either, resolving the location of the septic system, and possible delays in obtaining permits. The homeowners have agreed to the schedule. If everything goes as scheduled, the house will be finished on time for the homeowners to move in. Details of cost are as follows: slab floor $32,000, total risk $9,000; septic sewer system cost $18,800, total risk $5,100; dock and boathouse cost$82,000, total risk is $11,000. Contractor agreed to a late completion penalty of $2,500 per day each day the project extends beyond the completion due date.  

Thread: Read Case 1.8 on p. 36 of the Wilson text and address the following prompts:
1. Based on the case study, assess the risk tolerance of the homeowners.
2. Explain how the contractor might plan a risk strategy that would address the potential risks identified in the case study.
3. Do you feel the contractor handled the risk scenario well? Why or why not?

Replies: Respond to 2 classmates, adding to the discussion by commenting on their assessments and risk strategies. Discuss how their strategies aligned with yours and note any new risk strategy that you might adopt. Be sure to include new information in your reply in order to advance the discussion.
Reply to the following to topics separately with two sets of references:
# 1: Discussion Board Forum 1
Kara N. Lingenfelter 
Prompt 1: Risk Tolerance of Homeowners 
           In the case study presented in the weekly readings, the homeowners having a custom house built for them have several tolerances when it comes to risk.  Risk tolerance refers to the level of certain risks at which individuals involved in a project can accept (Wilson, 2015).  Determining the risk tolerance of the homeowners is important for the project manager to understand so that they may determine which actions they will take to mitigate the risks to stay within the tolerable limit (Wilson, 2015).  Due to the living situation of the homeowners during this build, they have a small tolerance for going over the allotted time of six months as it will costs them extra to stay in a hotel.  The completion time of the project seems to be the least tolerant aspect of this project for the homeowners and should be taken into consideration.  As the risk tolerance of the homeowners seem to be tolerant, they have agreed to tolerance specifications that fine the contractor for late completion, setting a standard of their risk tolerance (Shahtaheri et al., 2017). 
Prompt 2: How Contractors May Plan Risk Strategy
           Once a baseline is set for the risk tolerance of homeowners, the contractors and project manager are able to plan a risk strategy to mitigate possible failures or fines.  Risk strategies typically refer to a bigger picture of how an organization operates when faced with challenges and risks (Wilson, 2015).  The way an organization or project is structured can assist greatly when mitigating risks.  The Failure Mode and Effects Analysis (FMEA) can be utilized in situations as in this case study to prioritize risks and provide possible solutions so that the critical activities can be addressed first when a risk occurs (Cheraghi et al., 2017).  Based on the potential risks identified of pouring slab, finding sewage, and dock permits, the contractors at the beginning of the project should identify the major responses to these risks.  Project visibility and project flexibility should be outlined with the homeowners so that minimal change orders are requested throughout the project (Zailani et al., 2016).  Since many of the risks faced by the contractor related to weather and building permits, they should ensure that they are appropriately staffed so that if weather delays the pouring of the slab, there are enough people to complete the job in the minimal amount of time.  As for the sewage and dock permits, dedicated resources can be allocated to deal with the legality of finding and building such amenities.  
Prompt 3: Did the Contractor Handle Risk Scenario Well?
           Given the information provided in the case study, the contractor does not seem to have the best risk strategy outlined to handle potential risks.  Although they have much of the monetary risks outlined for the homeowner, the way the contractor will handle each encountered risk is not discussed.  It is imperative for the other non-financial risks to be discussed.  Given the fine agreed upon with the homeowners for going over the six-month time frame, the contractor should further prepare for maintaining approximate completion time for each project activity.  
           As risk is prevalent in everyday life no matter the task, it is important for project managers to evaluate each risk as it related to the project at hand and how they will overcome them.  Luke 14:28 (New International Version) says, “Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it.”  In this passage, it is reminded to all that although a plan and risk mitigation is important, the money is just as equality vital.  The contractors in this scenario have thought and agreed upon the financial aspect of each risk, but now must follow-up further in the execution of each mitigation measure. 
Cheragi, E., Khalilzadeh, M., Shojaei, S., & Zohrehvandi, S. (2017). A mathematical model to select the risk response strategies of the construction projects: Case study of Saba Tower. Procedia Computer Science. Retrieved from
Shahtaheri, Y., Rausch, C., West, J., Haas, C., & Nahangi, M. (2017). Managing risk in modular construction using dimensional and geometric tolerance strategies. Automation in Construction. Retrieved from
Wilson, R. (2015). Mastering risk and procurement in project management: A guide to planning, controlling, and resolving unexpected problems. Pearson. 
Zailani, S., Ariffin, H. A. Md., Iranmanesh, M., Moeinzadeh, S., & Iranmanesh, M. (2016). The moderating effect of project risk mitigation strategies on the relationship between delay factors and construction project performance. Journal of Science and Technology Policy Management. Retrieved from
# 2: Discussion Board 1
Joshua Swanson
MGMT 610 – Risk Management
  Projects rarely go according to plan (Wilson, 2015). It is these unexpected changes or events that force project managers to adjust course to ensure the project still stays on time and within budget all the while meeting the customer’s quality and scope expectations. As the saying goes, “An ounce of prevention is worth a pound of cure.” A little planning and prevention beforehand are much more desirable than a lot of knee-jerk responses to unexpected changes later. In other words, it is critical that project managers identify, analyze, and create responses for specific project risks in order to effectively manage realized risks (Fernando, Walters, Ismail, Seo, & Kaimasu, 2018). When identifying, analyzing, and responding to risks, it is important for the project manager, organization, and customers to be aware of the level of risk they are willing to accept in a project because it will dictate how risks are managed (Tulloch, et al., 2014). There are three typical levels of risk that can be used to describe the level of risk appetite. They are:  averse, neutral, and seeker. Risk averse projects have a low tolerance for risk while neutral projects have a moderate risk tolerance. Risk seeking projects allow high risks based off the potential gain (Wilson, 2015).
    In the case study presented, it appears the customer, the most important stakeholder, is risk neutral. There are several aspects of this case that indicate a moderate acceptance of risk in the hopes of a positive outcome. First, the customer sold their current home before their new home was complete (Wilson, 2015). Perhaps they needed the equity from their current home to fund the building of the new home. Whatever the case may be, they are obviously willing to take a risk of not having a home or staying in a hotel longer in order to reach their desired goal: a newer, larger home. Second, the customers are fully aware of the known risks that include weather delays with the foundation, the availability of permits, and finishing the septic system (Wilson, 2015). These risk undertakings, out of context, might lead one to believe the customers are actually risk seekers. On the contrary though, risk must always be analyzed in the context of the overall project environment. The customers have placed a clause on the contractor that will result in penalties if the agreed upon completion date is not reached (Wilson, 2015). This “insurance policy” tempers the assumption that the customers are risk seekers, proving they are risk neutral, while also not necessarily risk averse.
    To effectively manage risk, and avoid financial penalties, the contractor should conduct a robust risk management effort prior to the start of the work (Kyungmo, Sanghyo, & Yonghan, 2017). The contractor should begin by understanding what level of risk the customer and the contractor are willing to accept. This determination will play a large part in the risk response development area. The contractor, knowing what the risk tolerance level is along with the identified risks, should analyze the risks to determine the likelihood of them occurring (probability) as well as the magnitude of impact they might have (severity) (Wilson, 2015). With this analysis, the contractor could develop potential responses to the risks that threaten the timeline and cost of the project. This might include renting a cover to complete sequential parts of the foundation under cover. The contractor could also have an alternate sewage plumbing plan (i.e., a redesign) in place if the septic system does not work out. All of these efforts should be documented in a risk management plan (Wilson, 2015). This level of planning and risk prevention through contingency plans can either reduce the likelihood of a risk occurring or reduce the severity of its impact if it does occur.
    Assuming there is no information available other than what is detailed in the case study, the contractor has a small risk management process in place. Construction projects have unique risks that should be evaluated and planned for (i.e. weather, materials, equipment, etc.) (Kyungmo, Sanghyo, & Yonghan, 2017). The two indicators that the contractor has considered the risks are the agreed upon penalties from the customers and the contingency funds that are available for each risk. Typically, a contractor will not agree to penalties unless they are confident that they can manage the baselines against the risks to achieve success (Kyungmo, Sanghyo, & Yonghan, 2017). It is also obvious that the contractor has considered the risks because they have set aside significant sums of money to manage the risks. While these two indicators are promising, there is nothing else to indicate that the contractor has seriously considered the risks. That being said, the contractor has a small, but promising, risk management plan. Growing a risk management plan is very wise and resources should be dedicated to doing so. Dedicating time to risk management is a biblical concept. Solomon, the author of Proverbs, wrote, “The prudent sees danger and hides himself, but the simple go on and suffer for it” (Prov. 27:12, ESV). In other words, a wise man sees potential risks and pitfalls and tries to avoid them, while a fool walks headlong into them. This can be a costly strategy, and risk management is an effective tool to avoid such difficulty.
Fernando, Y., Walters, T., Ismail, M., Seo, Y., & Kaimasu, M. (2018). Managing project success using project risk and green supply chain management: a survey of automotive industry. International Journal of Managing Projects in Business, 11(2), 332-365.
Kyungmo, P., Sanghyo, L., & Yonghan, A. (2017). Construction management risk system (CMRS) for construction management (CM) firms. Future Internet, 9(1), 1-20.
Tulloch, A., Maloney, R., Joseph, L., Bennett, J., Di Fonzo, M., Probert, W., Possingham, H. (2014). Effect of risk aversion on prioritizing conservation projects. Conservation Biology, 29(2), 513-524.
Wilson, R. (2015). Mastering risk and procurement in project management: A guide to planning, controlling, and resolving unexpected problems. Upper Saddle River, NJ: Pearson.

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